Citi CEO Vikram Pandit joins China currency chorus

FORTUNE — It’s rare that a sitting CEO of a top U.S. bank — particularly one pushing China to abide by its WTO agreements while angling to let his firm compete freely in the Chinese market — will speak out on China’s currency controls and troubles with inflation. But Vikram Pandit, who rarely discusses such cross-border, hot-button issues in public, did just that on Thursday in New York. The CEO of Citigroup (C) was addressing a lunch crowd at a conference organized by the Committee of 100, a prominent group of Chinese Americans focused on U.S.-China relations, at the Waldorf-Astoria Hotel.

During what otherwise might have been a tame speech about the importance of U.S.-China relations (yeah, Vikram, we know), Pandit said that he had been in Washington earlier this week taking part in the U.S.-Strategic and Economic Dialog with Secretary of State Hillary Clinton, Treasury Secretary Tim Geithner, and Secretary of Commerce Gary Locke, and meeting senior Chinese officials, including Vice Premier Wang Qishan and State Councilor Dai Bingguo, and a number of prominent Chinese business leaders. The confab had started out with the same old clashes over China’s currency policies and human rights record, though it ended with a Chinese agreement to allow U.S. banks to sell mutual funds and underwrite corporate bonds in China for the first time.

Pandit didn’t mention those breakthroughs, but he did pick up the cudgel to hammer the currency issue — rather gently, of course, as Citi is still can’t expand its retail branches in China beyond the 13 cities where it is allowed and isn’t permitted to offer its full range of banking services. The company currently employs 5,000 people in China; Citi execs in Asia have said they would like to have 12,000 employees, and more than 100 branches, within three years.

“Making the currency convertible would go a long way toward solving the liquidity problem and addressing inflation,” Pandit asserted, but conceded that “it might also exacerbate unemployment and slow growth.”

Pandit also noted the negative impact of China’s currency controls, saying that the constraints on cross-border capital flows hinders the nation’s high level of private savings from flowing out of the country to find productive investments and opportunities abroad. “Today, only the government lends to international markets. As a result, we can’t be confident that what investment that does take place is happening efficiently,” Pandit told the crowd. “More importantly, as too much money chases too few opportunities in the domestic market, asset price inflation is inevitable. All that money has to be invested somewhere.” In April, consumer prices in China rose more than 5%, and Chinese officials have repeatedly acknowledged a housing bubble in major cities.

Pandit called for the U.S. to increase exports to China, and for Chinese consumers, who have an extraordinarily high savings rate of 53%, to pick up their spending. “By far, the most underdeveloped consumer market among the world’s major economies is China’s,” he said.

Still, Pandit remained optimistic about China-U.S. relations. “Devolution into trade wars — or worse — would fit the template of history,” he said. “But I don’t see that happening here, I really don’t.”

Trade wars, currency manipulation and asset price inflation in China are part of a vocabulary that departs from Pandit’s usual scripts. At the World Economic Forum in Davos, Switzerland, for example, Pandit spoke about expanding financial services to the poor. During the economic crisis, most of his public comments centered around financial regulation and reform.

So does this signal a new coming-out on the global stage for the Indian-born Pandit? Perhaps. But it might be more a sign that the angst that had seized the financial sector during the mortgage meltdown is finally over, and that it’s now time to focus on the rest of the world. Let’s hope.

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